GROUNDFLOOR, an investing and lending platform that allows anyone to participate directly in real estate investments on a fractionalized basis, has launched its new "Split Loans" offering.
The wealthtech company is allowing non-accredited and accredited investors alike to control their exposure to risk and reward in a way that was formerly only available to accredited investors and institutions. As the name suggests, GROUNDFLOOR will now be able to split larger real estate loans to create multiple positions in the same project for investors to consider. This allows GROUNDFLOOR to originate bigger loans for its borrowers, while also offering a wider range of possible returns to help investors further diversify their portfolios.
“Introducing Split Loans underscores how serious we are about our mission. This first-to-market innovation provides even more flexibility, choice and control to diversify with access to a broader range of investment opportunities across the spectrum of risk and reward in private real estate lending,” said Brian Dally, CEO and co-founder.
To date, GROUNDFLOOR's maximum lending amount for real estate developers is $2 million. While most borrowers do not require this level of funding for fix-and-flip projects, having Split Loans available now enables the company to pursue other types of real estate projects more aggressively, such as new construction or multifamily housing, which typically necessitates more capital.
GROUNDFLOOR maintains a first lien position on Split Loans, as usual. For investors, Split Loans offers more diversification options per loan, as all Split Loan projects will contain at least two investment options, each with its own risk profile and corresponding interest rate. Those in the first position of the loan are in line to receive repayment of principal before those in the second position. Because they are in the latter position of the "repayment waterfall," the second position investors have the opportunity to receive a higher yield in exchange for taking on a greater risk of loss.
With Split Loans, GROUNDFLOOR will also be able to continue selling more loans to its institutional partners, such as Direct Access Capital, Alpha Flow and Via Nova. These institutional partners can absorb excess supply of originated loans when needed.
